By Khairul Khalid
Wan Zulkiflee Wan Ariffin
Petronas profit after tax (PAT) for the first quarter of financial year 2015 (1Q15) fell 39% year-on-year (y-o-y) to RM11.4 billion, the company declares in a media conference today.
The state oil company attributed this steep fall in earnings to the plunge of crude oil price in the last 12 months.
Petronas’ 1Q15 PAT was on the back of RM66.2 billion revenue, a 21% decline y-o-y.
The average Brent price of crude oil in 1Q14 was US$54 per barrel, down 50% y-o-y from US$108 in 1Q14.
“We are still adjusting to the new low prices of oil, which is the ‘new normal’. Our disciplined approach and integrated operations mean that we should be able to weather the current volatility of oil price,” said Petronas president and group chief executive officer (CEO) Wan Zulkiflee Wan Ariffin.
The CEO said that the drop in earnings was partly offset by several factors such as higher crude oil production, processed gas trading, and liquefied natural gas (LNG) sales volume.
Wan Zulkiflee also said that the falling ringgit against the US dollar was in favour of Petronas. There were no significant impairments in 1Q15.
According to Wan Zulkiflee, Petronas’ upstream business segment bore the brunt of the oil price drop, with 1Q15 PAT falling 48% to RM7.9 billion despite an increase in production.
Nevertheless, downstream business proved to be a bright spot with 1Q15 PAT posting a 6% increase to RM1.9 billion. This was mainly due to improved refining margins from domestic and international refineries.
The CEO also highlighted significant improvements in operations with production increasing 5% in 1Q15 y-o-y. The better upstream performance is attributed production enhancement, ramping up of production in Malaysia and Vietnam, higher demand in Turkmenistan, and better well performance in Canada.
However, these have been negated in Egypt with higher natural decline rate and lower gas demand from the power sector.
The CEO said the low oil price is an opportunity for the company to increase its productivity and reduce its costs.
“The cost reduction is an ongoing exercise. In the last few months, we have saved about RM200 million,” said Wan Zulkiflee.
The CEO said that Petronas is already embarking on cuts for capital expenditure (capex) and operational expenditure (opex). He said that Petronas capex will be RM90 billion in 2015 including acquisitions, with RM54 billion allocated for Malaysian projects.
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